I can’t pretend to understand the arcane workings of IPOs or high finance, but it seems clear that General Motors’ IPO yesterday was a success. The stock was priced right, the markets responded, the government sold almost half its GM shares, and the bailout (despite what you have heard) may go down as a bargain for the taxpayer.
In another sense, Washington won the battle over Wall Street. The big underwriting banks took “amazingly low fees of just 0.75%, or $10 million for the government-owned portion, …a pittance versus the 6% Wall Street likes to charge.” If the stock price had soared, the Treasury would have lost about $4 billion—but it didn’t.
The result was the third-largest global IPO in history and showed light at the tunnel’s end if the government sells the rest of its stake, as the White House hopes, by mid to late 2012. Still, GM stock has to rise about $20 a share for the Treasury to break even.
There are interesting takes in the media about all this, including consequences and costs for the industry, both hidden and exposed. Paul Clemens wrote an op-ed piece for the N.Y. Times about some of these costs. They range from old, discarded factories in Detroit and elsewhere to the “economic disconnect” between the devastating unemployment realities in Detroit and the analytic “scoreboard” charting the path of the new GM.
The IPO was good for the auto industry as a whole, though not so positive for Ford, which took a few lumps in the stock market yesterday. The story of how GM managed to win over investors points to, one hopes, a new spirit of management. A lot of credit for this is owing to CEO Dan Akerson, I think, and CFO Chris Lidell, both of whom have scrambled to get the company’s finances in order and revitalize a dead product line.
But the biggest cost to GM has been in public opinion, which has for the most part railed against the bailout and bankruptcy from the beginning. You can’t convince these folks that it was the right thing to do with numbers or data or showing them the consequences of the alternative.
If they can be won over at all, it will be in the proof of the pudding, which is yet to come. It might also not be a bad idea if we could send them all on a trip to Detroit.
Is the “new GM” on the right track, or will there be trouble ahead?